A $110,000 machine with a 11-year class life was purchased 2 years ago and has...
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A $110,000 machine with a 11-year class life was purchased 2 years ago and has a current salvage value of $95,000. The machine will now be replaced with a new machine costing $100,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $14,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 21 percent.
1.. What is the initial outlay for the project? a) ($100,000) b) ($75,000) c) ($5,000) d) ($90,000) e) ($6,050)
2. What is the incremental annual cash flow associated with the project in year 1? a) $11,060 b) $15,650 c) $5,000 d) $22,755 e) $19,750
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